Generate real estate passive income in 2021 with the best passive income ideas that use real estate strategies to create passive income streams.
Looking for real estate passive income ideas to make money in 2021? Here are the best passive income ideas that use sound real estate strategies to generate passive income streams.
The year 2020 was defined by the coronavirus pandemic and indeed stressed the need for passive income streams in maintaining one’s lifestyle.
What Is Passive Income?
But what is passive income and what are the best ways to make passive income? Passive income is one of the good investment strategies investors use to generate income that requires little or no effort to maintain.
There are numerous passive income investments to help you create passive income streams. Some of the most popular passive income strategies include earning through online platforms like stocks, bonds, and real estate.
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4 Enviable Benefits Of Passive Income
Before we get to the real estate passive income investments options, let’s understand the benefits of passive income. Here are 4 benefits of passive income:
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Generating passive income doesn’t require constant effort
Earning through passive income investments is one of the wisest and most popular investment strategies as does not require you to put in continuous efforts.
For instance, if you invest in the REITs (Real Estate Investment Trusts) or crowdfunding platforms, all you have to do is invest with the company and enjoy the returns flowing into your account.
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Passive income acts as a cushion during a recession
Passive income acts as a cushion during challenging times like recession. It provides you with a backup income to help pay the bills in case you lose your full-time job.
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Passive income acts as an anchor against inflation
Passive income acts as an anchor against inflation as these investments generate higher income due to increasing expenses. During inflation, your living costs may increase and passive income helps you keep up with the increasing cost of living.
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Passive income gives you financial independence
Financial independence and location independence are some of the biggest benefits of passive income. You can invest your money and live anywhere in the world, as long as you’re earning an income that just flows into your pocket no matter where you are.
7 Smart Real Estate Passive Income Investments
Real estate is one of the best ways to make passive income as it has the greatest potential to generate passive income on a higher scale, as compared to all other investment options.
With trending investment options and novel approaches to real estate investments, like fractional ownership, real estate offers the best passive income opportunities to address the demands and aspirations of every customer who aims to create real estate passive income streams.
Here are some real estate passive investment options that can help you generate massive passive income without needing to invest too much of your time and effort.
You can choose the best passive income ideas that suit you, as there are real estate investment options that work for all types of passive income investments, ranging from low to high.
1. REITs
Real Estate Investment Trusts are similar to dividend stocks. Many investors invest equal amounts of money and the corporation pools the investment to invest in various properties.
REITs maintain a diverse portfolio. They invest in various commercial properties and rental properties. The investors earn a steady income through capital appreciation i.e., share value appreciation and through rental returns.
REITs are a less risky real estate investment as the diverse portfolio ensures a regular and steady flow of passive income. If any asset underperforms, the losses are balanced by the performing assets.
Asset management plays a vital role in the capital appreciation of REITs. A property that is ill-managed might incur losses. This is more pronounced in commercial properties which need up-gradation due to wear and tear, and also due to ever-changing property trends.
REITs are a hassle-free investment as the property is managed by the property manager hired by the corporation. Investors who invest in REITs don’t have to worry about asset management.
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2. Debentures
Debentures are one of the best ways to make passive income without owning or buying a property. They are the debt instruments that let property developers gather money through investors’ by issuing debentures.
The investors earn through the interest payouts on the debentures. The interest rates are termed coupon rates which generally lie between 4 to 12%.
Debentures are broadly classified into two types – convertible and non-convertible debentures. Convertible debentures can be converted into the shares of the company after a specified period of time.
Non-convertible debentures (NCDs) are those that cannot be converted into equity shares. NCDs cannot be sold before the maturity date but they can be traded in the secondary market i.e., BSE and NSE.
The NCDs in Real Estate have tenure or holding period of a couple of years, generally between two to four years and are short-term investments backed by physical assets in real estate.
This reduces the risk of the investment which is the prime motive of the investor. The investors can earn a steady passive income through monthly or quarterly interest pay-outs.
They are also liquid as they can be traded in the secondary market. Through NCDs, you can invest in a high-graded asset and effortlessly earn good returns.
3. Residential Rental Income
Residential properties are one of the top real estate income strategies in the list of passive income investments. This is an old investment strategy where the investor buys a property and rents it out to earn a steady flow of income.
Rental properties provide a hedge against inflation as your rental income also increases proportionately when living costs increase. This can help you meet your income requirements and cover your expenditures during tough times.
If you invest in REITs, all you can do is accept the earnings. If you do not like the earnings, you can sell them and move ahead. But, you can increase the value of your rental properties by using tactics like remodelling and customizing and consequently increase your rental income.
If you buy and rent a residential property as a way to earn passive income, you must also ensure that you pay the rental income tax on rental income regularly.
4. Commercial Property Leasing
Commercial properties are the most sought after and lucrative guaranteed passive income real estate investments, especially in terms of profitable returns from rental income.
Commercial properties are leased out to tenants who use the property for business purposes. These properties do not go out of trend as there is always a need for commercial spaces.
There are various investment options in commercial properties, like warehouses, data centres, co-living and student housing properties. These properties have good expected returns, and long-term leasing agreements are common in commercial properties.
One of the upsides of leasing commercial properties is that the tenants are usually invested in being in a specific location and are not inclined to relocate with their set-up or move into a new property.
These long-term agreements help reduce potential vacancy risks and also help you earn attractive returns regularly. But if you’re concerned about the performance and risks of these types of properties they may not be the best passive real estate investments for you.
On a long-term basis, commercial properties need to be refurbished and remodelled, which requires an investment. As passive income investments, commercial properties can incur comparatively high maintenance and repair costs, but they also earn proportionately.
5. Fractional Assets
The ever-changing demands and the interests of customers are introducing novel approaches like fractional ownership into the real estate domain. Investors can now buy fractional ownership assets with small ticket sizes.
This real estate investment concept has made investing in high-grade real estate accessible to every customer. Now, you can own a share of the asset class property and earn good returns regularly. As an investor in fractional assets, you can invest and own a part of any property, whether rental or commercial property.
There are online platforms that offer fractional ownership assets where you can become an owner of high-graded assets and earn high returns of passive income online with investments as small as INR 5 lakhs.
Investing in fractional assets can generate high regular returns as the assets are of high quality. This ensures good capital appreciation and you can sell off your share any time you want and recover your investment and more, as it appreciates with time.
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6. Crowdfunding
Crowdfunding is a type of investment where various investors come together and pool small sums to invest in a property. Crowdfunding generally happens over online platforms. If the project or the venture does not receive the funds required, then the pooled sum is returned to the investors.
You can invest in properties and earn returns through rental income through crowdfunding. You can become a shareholder with a small sum of money and generate a high income with small amounts of money.
You can also own a share of assets that you may not be able to afford as an individual, owing to the high capital investment. This has made real estate investing accessible to more small investors, as compared to traditional investment options.
7. Peer-to-Peer Lending
Peer-to-Peer lending, also known as P2P lending, is a type of passive real estate investing where the investor seeks a loan from another individual. As an individual, you can earn passive income through the interest on the loan.
P2P lending allows developers to bag a loan without any mediation so they need not run hither and thither for property loans. On the lender’s part, there is a risk factor involved. The upside of this investment is that, as a lender, you’re entitled to greater and higher returns owing to the high-risk factor.
After learning about the best real estate passive income ideas to generate passive income streams, we hope you’ll consider owning a property that will earn passive income for you.
Assetmonk is an online real estate platform that offers trending investments such as condos. You can also invest in these properties through NCDs and fractional ownership with an expected IRR of up to 21%. Visit today to invest and earn more.
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Disclaimer: The ideas and strategies on this website are based on personal opinion. They do not and should not be considered as professional financial investment advice and should never be used without first assessing your own personal and financial situation, or without consulting your professional investment advisor. All investments, including real estate, are speculative in nature and involve a substantial risk of loss. We advise you to do your due diligence before acting on any information that we publish and do not, in any way, warrant or guarantee the success of any action you take in reliance on our statements or recommendations.
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